Supreme Agro Foods Private Ltd v. Income Tax Settlement Commission And Another

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH Date of decision: 14.1.2013 CWP No. 531 of 2013 Supreme Agro Foods Private Ltd. ......Petitioner vs. Income Tax Settlement Commission and another.....Respondents CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE RITU BAHRI Present: -Ms. Radhika Suri, Advocate for the petitioner .......... Challenge in the present writ petition is to an order passedby the Income Tax Settlement Commission (for short the 'Commission')dated 30.10.2012, deciding the request of the petitioner for settlement interms of the provisions of Section 245-C of the Income Tax Act, 1961(for short the 'Act'). The grievance of the petitioner is in respect of application of12% gross profit rate on the ground that such gross profit rate could beapplied during the course of the assessment and cannot be made part ofsettlement, when the same was not an issue raised by the Commissionerof Income Tax in his report submitted in terms of Rule 9 of the IncomeTax Settlement Commission (Procedure) Rules, 1997 (for short the'Rules') We have heard learned counsel for the petitioner at somelength and find no merit in the present petition. A perusal of the ordershows that the Commission has taken into consideration the followingfacts at the time of passing of the order: - -2- Learned counsel for the petitioner argued that the issuebefore the Commission was in respect of cash credit entriesamounting to Rs. 3,13,89,655/- and not the income derived from itsbusiness. An issue which was not raised by the Commissioner in hisreport nor such an issue was arising for consideration before theCommission, therefore, the same cannot be taken into consideration toreturn a finding that there was an undisclosed income only for thereason that the less gross profit rate was applied. It is contended thatthe proceedings before the Commission and proceedings forassessment are distinct and that the factors which may be relevant forassessment, are not relevant and cannot be taken into consideration forthe purpose of settlement. In support of arguments, learned counselfor the petitioner relied upon a judgment of Hon'ble the SupremeCourt reported as 2010 (328) ITR 477 SC, Brij Lal and ors vs. Commissioner of Income Taxin respect of scope of powers of theCommission under Section 245-C of the Act. Reliance is also placedupon an order of Delhi High Court in CWP No. 10198 of 2009,Commissioner of Income Tax vs. M/s Godwin Steels Pvt. Ltd.decided on 23.2.2012. No doubt, the Commissioner of Income Tax in his reportunder Rule 9 of the Rules, has not referred to gross profit rate appliedby the petitioner as an objection for the settlement but the fact remainsthat the Commission has found that the rate of profit adopted by theassessee was in fact leading to undisclosed income and thus made anaddition on the basis of the information submitted by the assessee. Infact the order passed by Delhi High Court inM/s Godwin Steels Pvt.Ltd negates the arguments raised by the petitioner. The court held thatthe Commission has to consider the material brought on record before it and that consideration means independent examination of theevidence and the material on record. The relevant extract is as under: - 'The aforesaid sub-section requires that the materials broughton record before ITSC shall be “considered” by the membersbefore passing any final order under sub-section (4). Theword “consideration” means an independent examination ofthe evidence and materials brought on record before the ITSCby the members and application of mind thereto with a viewto independently assess the materials and evidence, whetheradduced by the assessee-applicant or by the CIT and come toa conclusion by themselves.' it and that consideration means independent examination of theevidence and the material on record. The relevant extract is as under: - 'The aforesaid sub-section requires that the materials broughton record before ITSC shall be “considered” by the membersbefore passing any final order under sub-section (4). Theword “consideration” means an independent examination ofthe evidence and materials brought on record before the ITSCby the members and application of mind thereto with a viewto independently assess the materials and evidence, whetheradduced by the assessee-applicant or by the CIT and come toa conclusion by themselves.' The judgment in Brij Lal's case (supra), has noapplicability to the facts of the present case. In the aforesaid judgment,Hon'ble the Supreme Court has discussed the scope of Section 245-Cof the Act. There is no finding that the gross profit ration can beapplied only during the assessment proceedings and not in theproceedings under Section 245-C of the Act. Since, the material was available before the Commissionand such material has been taken into consideration for returning afinding which is relevant for determining undisclosed income of thepetitioner. We do not find such order warrants interference in exerciseof the writ jurisdiction of this Court as a part of the process of judicialreview. Dismissed. (HEMANT GUPTA)JUDGE 14.1.2013preeti (RITU BAHRI)JUDGE